Accounting for Income Taxes Research Paper by RitaA

Accounting for Income Taxes
Discussion of the Exposure Draft (ED) released on July 14, 2005 by the Financial Accounting Standards Board (FASB).
# 61378 | 4,358 words | 11 sources | APA | 2005 | US

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The Financial Accounting Standards Board released an Exposure Draft on July 14, 2005, entitled "Accounting for Uncertain Tax Positions, An Interpretation of FASB 109, Accounting for Income Taxes". This draft was released for comment before its implementation as part of the Generally Accepted Accounting Principles for entities to use in preparation of their financial reports. This paper shows that the purpose of the Exposure Draft is to resolve widespread diversity in accounting for income taxes by requiring firms to recognize in their financial statements the best estimate of the impact of a tax position. The paper shows that the ED also contains guidance for measuring the benefit that is recognized for an uncertain tax position and when that position should no longer be recognized. The paper examines comments by critics who feel that the Exposure Draft is complex, may be difficult to implement and could result in significant overstatements of firms' tax liabilities.

Paper Outline:
Financial Reporting vs. Tax Reporting
Purpose of FASB 109, Accounting for Income Taxes
Purpose of the FASB's Exposure Draft

From the Paper:

"The temporary differences between the U.S. income tax rules and the GAAP requirements for financial reporting result in some income tax expense being recorded long before it is paid creating a deferred income tax liability (Horngren, et al., p. 340). These temporary or timing differences arise because some revenue and expense items are recognized at different times for tax purposes than for financial reporting purposes. Timing differences may accumulate over more than one year and create variations between the tax basis of an asset or liability and its reported amount in financial statements. These temporary variances usually become taxable or deductible when the related asset is recovered or the related liability is settled. A deferred tax liability or asset represents the increase or decrease in taxes payable or refundable in future years as a result of temporary differences and carry forwards at the end of the current year (FASB, 1992)."

Cite this Research Paper:

APA Format

Accounting for Income Taxes (2005, October 05) Retrieved September 18, 2019, from

MLA Format

"Accounting for Income Taxes" 05 October 2005. Web. 18 September. 2019. <>